policy we have laid the basis for a further expansion of our business
activities, which will enable us to maintain for FGH the image of
growth stock - strengthening of the capital structure combined with
growing dividends
Our real estate business has contributed to this to a not incon
siderable extent. We have aimed at a regular replacement of our
holdings by acquiring new, well-selected real estate projects. This
brought some pressure to bear on the direct yield, but quality,
nature and location justified the expectation of a growing yield with
a rise in value as a result.
The results obtained by our real estate business will show con
siderable fluctuations from year to year, because they are made up
of operating result and sales result. If one is not forced to sell, one
can await the best market situation. Direct sale generally takes place
when the sales price exceeds the anticipated capitalized future yield.
If real estate is disposed of through investment companies, a well-
balanced real estate package is put on the market at an earlier stage.
Although the investor gets an initial yield below the level of interest
rates on capital, he may, contrary to the investor in fixed interest-
bearing securities, expect growth in yield and capital.
The FGH develops and acquires real estate, not in order to retain
it for yield's sake, but in order to follow the demand in the market.
The result of this philosophy is a holding of real estate of a limited
size, although this may be subject to certain fluctuations from
year to year due to market conditions. Only in this way can a real
estate business live under one roof with a finance business.
For attracting funds for our finance business we have to look almost
exclusively to the capital market. In doing so, we fulfil the function
of transmitters of capital on behalf of those who have no direct
access to the capital market for their finance. Attuning passive
financing to active financing is of the utmost importance here. From
the points of view of liquidity and solvency the average term of the
total of funds attracted must not be shorter than that of investments.
In these times of strongly fluctuating interest rates considerations of
profitability force us to synchronize terms in passive and active
financing.
The possibility of accelerated redemption which is frequently offered
in active financing further tends to make us more reluctant to aim at
a maximum extension of our mortgage portfolio when interest rates
in the capital market are relatively high than we are when interest
rates are relatively low, without, however, our losing sight of our
servicing function in this sector. Over the longer term it may be more
profitable at a time when interest rates on capital are relatively